KARACHI: Pakistan advanced plans for its first diversified payment rights financing program Thursday, signing an agreement with the International Finance Corporation and Bank Alfalah for an initial transaction of up to $100 million.
The deal aims to mobilize long-term foreign-currency financing against eligible future foreign-currency payment flows, offering Pakistan a new potential source of external funding and access to international capital markets, the Finance Division said.
Bank Alfalah is the first Pakistani bank to undertake a DPR transaction.
The agreement was signed by Momina Aijazuddin, IFC’s regional industry director for financial institutions in the Middle East and Central Asia, and Atif A. Bajwa, president and CEO of Bank Alfalah. The signing took place at the Finance Division in Islamabad in the presence of Finance Minister Muhammad Aurangzeb.
Program Could Pave Way for Broader Market-Based Financing
“The initiative involved significant regulatory, policy and technical work,” Aurangzeb said, describing the agreement as “an important first step” that could pave the way for similar market-based financing structures.
Diversifying sources of foreign-currency financing is important for Pakistan, he said, adding that innovative financing mechanisms could help support investment and productive economic activity.
Aurangzeb also stressed the need to build a pipeline of eligible projects that could use the new financing channel effectively, according to the Finance Division. He credited the Finance Ministry, State Bank of Pakistan, IFC and Bank Alfalah for their coordination in developing the transaction.
The initial DPR transaction envisions financing of up to $100 million. Depending on market conditions and the performance of the first transaction, the program could support additional financing and attract broader participation from international institutional and private investors, the Finance Division said.
Structure Offers Alternative to Conventional Borrowing
DPR transactions allow financial institutions to raise foreign-currency funding by assigning rights to specified future foreign-currency receivables. The structure can provide an alternative to conventional borrowing and potentially broaden access to international capital markets.
The Finance Division said the transaction could set a precedent for similar DPR deals by other Pakistani banks, subject to market conditions and the initial program’s performance.
The initiative is being pursued under the direction of Prime Minister Shehbaz Sharif as part of government efforts to diversify external financing sources.
IFC representatives welcomed the government’s and central bank’s support, saying the structure could provide an additional channel for long-term international financing and contribute to developing Pakistan’s capital markets.
Bank Alfalah said it would use the structure to meet eligible foreign-currency requirements and support productive investment.
The Finance Division described the agreement as a milestone in developing Pakistan’s debt capital market.
The signing ceremony was attended by Finance Secretary Imdadullah Bosal, Simon Andrews, IFC division director for Pakistan, Afghanistan, Kyrgyz Republic, Tajikistan and Turkmenistan, and senior officials from the Finance Division, IFC, Bank Alfalah and the State Bank of Pakistan.
